Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212246
Authors: 
Oinonen, Sami
Paloviita, Maritta
Vilmi, Lauri
Year of Publication: 
2013
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 6/2013
Abstract: 
This paper analyzes euro area and U.S. inflation dynamics since the beginning of the 1990s by estimating New Keynesian hybrid Phillips curves with time-varying parameters. We measure inflation expectations by subjective forecasts from Consensus Economics survey and so do not assume rational expectations. Both rolling regressions and state-space models are employed. The results indicate that in both economic areas the inflation dynamics have steadily become more forward-looking over time. We also provide evidence that the impact of the output gap on inflation has increased in recent years. Overall, diminished inflation persistence emphasizes the role of credible monetary policy in inflation dynamics.
Subjects: 
inflation
Phillips curve
time-varying parameters
survey expectations
JEL: 
E31
C22
C51
Persistent Identifier of the first edition: 
ISBN: 
978-952-6699-09-7
Document Type: 
Working Paper

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